Spanish labor not taking to those new austerity measures too well

posted at 6:06 pm on July 11, 2012 by Erika Johnsen

Spain’s recent financial and economic woes in the midst of the wider eurozone crisis require that they make some tough decisions about where and how they’re going to rein in their budget problems. The government announced more planned austerity measures on Wednesday morning, which they hope will cut their budget deficit by $80 billion through 2015 — even while they estimate that the eurozone’s fourth-largest economy is more likely to contract than grow for the next several years.

In an impassioned address to parliament, Mr. Rajoy called on all Spaniards to back the measures, which include a value-added tax hike to 21% from 18% and cuts to jobless benefits and public sector wages, saying Spain’s economic situation is “extraordinarily serious.” …

The austerity steps build up on previous cuts that have already led to an income-tax hike as well as steep budget reductions for all ministries. They also come as Spanish officials are separately negotiating detailed conditions for the EU’s bank bailout that may force Madrid to give up most of the control over its banks to European institutions, and impose losses on holders of banks’ subordinated debt. …

The new measures also include a cut in jobless benefits for new claimants, a significant step in a country where unemployment represents almost 25% of the workforce, and a salary cut of around 7% for central government employees. The measures also seek €3.5 billion in savings linked to public services provided by local governments. …

Since Mr. Rajoy’s conservative Popular Party has a strong majority in parliament, he isn’t expected to find significant challenges in getting the measures approved. … Recent polls have shown that austerity is having only a moderate negative effect on Mr. Rajoy and his conservative party.

Spain is indeed in dire straits (25 percent unemployment is certainly nothing to sneeze at!), and economic contraction is going to mean very real material hardship for many. Per that last paragraph, it seems like the Spanish are generally taking the tough news pretty well — they’re not yet running amok calling to elect more socialists into office like a certain snooty neighbor of theirs. But, we saw how many of Greece’s public employees and labor-union workers reacted to the reality that there was no more recourse for free-money entitlement handouts, and it’s a sentiment that apparently spans national boundaries.

As the miners marched down the city’s main boulevards, chanting, waving banners, brandishing sticks and setting off fire crackers amid clouds of thick smoke, they were confronted by riot police.

Some threw and bottles at the police who were trying to contain them. Volleys of rubber bullets were fired into the crowds in response, with dozens of protestors led away in handcuffs, some with blood streaming down their faces. More than 20 people were injured, including police officers, demonstrators and onlookers. …

Gathering outside the Ministry of Industry later, amid placards emblazoned with slogans against the cuts and the ruling conservative Popular Party government, Carlos Marcos, 41, a miner since the age of 18, warned: “If they don’t pay attention to us, we’ll be back – with dynamite.”

…Yikes. This is undeniably going to be a hard time for Spain, and will only continue to be so while other European countries keep skirting austerity and spending money like drunken sailors, but it would only be worse if they continued to put off the inevitable — and the rioters can be sure to thank big-government, central-planning, entitlement-crazed socialistic policies when they get a chance.

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Maybe the displaced workers can snag one of Spain’s cool new “green jobs”– oh wait.

Really, since one Spanish economist’s study of Spain’s “green industry” showed that for every 4 jobs were created by green technology, 9 jobs were lost to the economy, would a more drastic imposition of “green” do as much for “austerity” as what the government’s doing now?

Como dice el profesor Schwartz al profesor Krugman: “Keynesians got us into this mess and now we have to sacrifice our principals so that they can get us out of this mess.”

Erika, thanks for laying out what the austerity programs actually consist of, too often the stories leave that out. I wonder if Mr. Marcos, the miner, would rather be here where the president has decided his occupation is too icky to continue. Maybe mining will rebound in Spain since “green” bit the dust.

How exactly do you generate economic growth when income taxes are being hiked, VAT tax is a ridiculous idea and wrong as heck idea in the first place much less be set at an astonishing 21%….

Conservative Popular Party my butt…..Why don’t we call them the TAX HIKING CLUELESS PARTY instead? Seriously…. I don’t sit and cheer for spending cuts when they are accompanied with breathtaking tax hikes…

You are taking money out of Businesses and Individual Consumers hand over fist….economy continues to get worse….Debt still rises…solution? Grab more money out people’s hands.. Economy gets even worse still….Debt still rises…Solution? Grab more money out of people’s hands….

It just amazes me that when ecomomic collapse due to the ideology and policies of the Left are staring everyone in the face…

… no one stands up and points that fact out, and suggest changing said ideology and policies to the free market system of the Right, by removing all government interference and social engineering regulations.

Really, since one Spanish economist’s study of Spain’s “green industry” showed that for every 4 jobs were created by green technology, 9 jobs were lost to the economy
de rigueur on July 11, 2012 at 5:35 PM

Actually, I’m not really familiar with Spanish industry, let alone this guy’s analysis. But even THAT is probably just the tip of the iceburg.

That sounds like a really conservative estimate insofar as the 4 “green” jobs were probably temporary, or even currently still propped up by taxpayers. While most of the 9 private-sector jobs would be indefinite positions.

I’d go so far as to say that if you step back far enough and look at the bigger picture, the green movement – like Communism in general – doesn’t just result in a limited or partial return on investment. It’s actually a NEGATIVE return on investment; what’s paid into it is more than merely lost; it acts as a poison to the free market.

Spain’s socialists went all in on the green economy even when they knew that each green job cost 2.2 real jobs. This is socialism the thinking that 1+1=POTATO and twisting off on anybody that tell you 1+1=2.

I’d go so far as to say that if you step back far enough and look at the bigger picture, the green movement – like Communism in general – doesn’t just result in a limited or partial return on investment. It’s actually a NEGATIVE return on investment; what’s paid into it is more than merely lost; it acts as a poison to the free market.

logis on July 11, 2012 at 7:02 PM

If free markets want green technology the markets will demand green technology, industries will be created in response to the demand, and real jobs will be created to supply the demand.

Anything else is a diversion of resources via taxation from the free market into artificially created and sustained markets that are unresponsive to any demand except the government’s. When the subsidies fail, the artificial markets fail, since there is no real free market demand for the artificial industry’s product in the first place.

I’d agree with you: withdrawal of resources from free markets via taxation is already “harmful” to the free market to that extent– the free market is deprived of capital or other resources with which it could grow, and more efficiently satisfy demands.

The creation of tax-subsidized “artificial markets” further diverts free market capital and resources into production that the free market itself does not demand– a complete waste of capital and resources, since the artificial market invariably collapses when the tax subsidies are withdrawn. So the tax money is gone, market distortions that divert additional funds and resources into useless industry are gone, and nothing to show for it.

All that’s left is the “multiplier effect” of government investment, and whatever labor in the artificial industry spends in the free market. But that’s money that could just as well have gone into a productive industry, which unlike the artificial industry can grow to meet demand, and paid for those same laborers in productive occupations. So the net effect of artificial industry investment “multipliers” and wages are a wash. (Or worse, if those laborers are now trained in unemployable skills and have to be re-trained– by government? another diversion of tax dollars?– to do something employable.) I think you’re right, if one steps back far enough, economically speaking, government destroys whatever it touches.

Conservative Popular Party my butt…..Why don’t we call them the TAX HIKING CLUELESS PARTY instead? Seriously…. I don’t sit and cheer for spending cuts when they are accompanied with breathtaking tax hikes…

You are taking money out of Businesses and Individual Consumers hand over fist….economy continues to get worse….Debt still rises…solution? Grab more money out people’s hands.. Economy gets even worse still….Debt still rises…Solution? Grab more money out of people’s hands….

Varchild on July 11, 2012 at 6:29 PM

Europeans define “conservatism” a wee bit differently than we do. It has nothing to do with the size or intrusiveness of government.

Barky doesn’t need a VAT. United States Extreme Court just ruled that absolutely NOTHING can be taxed.

If you can tax NOTHING then why waste time with a complicated VAT?
Just tax people’s very existence.

Varchild on July 11, 2012 at 6:44 PM

If Congress went that route, it would have to be imposed in lieu of a mandated purchase of something of value (health “insurance”, a minimum amount of broccoli, Government Motors Volts, E15 gasoline, trips on AMTRAK, New Sedition Slim…er, New York Times subscriptions), and it cannot be higher than the value of the mandated purchase.

I think we will see a new wave of Communist, Facist, and Islamist revolts across Eurabia. The so called healthy economies are spending themselves into this problem and will get into the same trouble in a few years.

We are going down the same road. Our spending will bankrupt the USA sooner than we think.

European countries can never go to a free market system. The people are so entrenched in the nanny state mentality that they would $hit their pants if they had to make it through their own effort and their own decisions.

The ones that don’t feel that way have already fled to more sane pastures. The sheeple have no shepherd and absolutely no self confidence left.